National Health and Hospitals Network (NHHN)

The Prime Minister today released A National Health and Hospitals Network for Australia’s Future in response to the work of the Health and Hospital Reform Commission.

Characterised by the Prime Minister as the most significant health reform since the introduction of Medicare nearly three decades ago, the plan consists of three distinct planks:

  • Federal funding – the Commonwealth will play the dominant role in health funding, taking 60% of funding responsibility.  This will include a stipulation to the states to devote one third of GST revenue to health and hospitals.
  • A new national network – with its role as primary funder, the Commonwealth will impose a set of national standards underpinned by national reporting on private and public hospital performance, the establishment of an efficient price for all health services critical to the level of funding provided by the Commonwealth and the setting of national quality and safety standards.
  •  Local hospital networks – within the national system, groups of hospitals will be arranged regionally into a network overseeing day-to-day administration.  Regional groupings will be designed to provide a greater range of hospital services within local areas. The networks will be established as state statutory authorities.


The new federal funding model means the Commonwealth will become the majority funder of public hospitals for the first time.  The takeover is estimated to cost $30.9billion over the coming years.   The Commonwealth will directly fund:

  •  60% of every public hospital service;
  •  60% of public hospitals’ recurrent expenditure on research and training;
  •  60% of public hospital infrastructure maintenance; and
  • 100% of GP and primary health care services, including primary health care services provided to outpatients.

Commonwealth funding will no longer be based on delivering block grants to the states.  Rather, funding will go directly to the Local Hospital Networks on the basis of an efficient price.  Over time, the Commonwealth is expected to move to fund 100% of the efficient price.

Over the first five years of the reforms, approximately $90 billion in GST revenue will be dedicated to health and hospital spending, invested through a new National Hospitals Fund.

Efficient prices for health services will be set by an independent umpire, consulting with health professionals. Health costs rising above this efficient price will be met by the states.

National standards 

The Government intends to use its role as a majority funder of health and hospital services to establish clear national standards that hospitals will have to meet.

The key national standards will apply to:

  • access to public hospital care, particularly emergency departments and elective surgery;
  • access to local GPs and other health professionals;
  • financial performance and efficiency; and
  • safety and quality in the health system.

A key aim will be to improve accountability and transparency through providing members of the public with more information so they can make more informed choices.

Three national governance systems will be established to help establish unified standards, these are:

  • An independent pricing function;
  • a performance reporting and auditing function;
  • a clinical standards function (evolving from the Australian Commission on Safety and Quality in Health Care).

Local Hospital Networks

The Commonwealth will require states to introduce Local Hospital Networks – small groups of public hospitals with a functional or geographic connection.

Networks will be responsible for the day to day operations of hospitals within, including planning to deliver on performance standards and manage budgets. Performance at a Network level will be published and transparent to clinicians and the community, on a nationally comparable basis.

Networks will be responsible for delivering on agreed services and performance standards. This negotiated outcome could be formalised through an annual “service contract” —the state sets out a target for the amount of hospital services to be purchased, and the Network sets out the performance targets and benchmarks that it agreed to reach.

Networks will be established as separate state authorities.  They will have a professional Governing Council and CEO who will be responsible for delivering services. Governing Councils will include local health, management and finance professionals.  Council members will be appointed under state legislation. Each Network’s CEO will be appointed by the Council and accountable to the Council.

Existing state health departments 

Rather than traditional service delivery, the Commonwealth’s policy document envisions a changed role for existing state health departments. The state departments will specialise in system wide service planning and performance management issues, and work with Networks to negotiate service contracts (negotiations to receive Commonwealth funding for services).

The states may also continue to play a procurement role.

The Local Hospital Networks will employ hospital staff, with conditions of employment managed by the states.

States will continue to own public hospital assets and will continue to fund the remaining costs of hospital services and any costs over the efficient price.

Expected additional reforms 

  • The ‘National Health and Hospitals Network’ report details the expected reforms the Government will announce in coming weeks and months, building on the structural reforms announced today.
  • These reforms will be made across a range of areas, including in:
  • – public hospitals, especially public hospital emergency departments and access to elective surgery;
  • – GP and primary health care, in particular improving coordination of GP and other kinds of health care for people with chronic illness;
  • – the health workforce, to ensure there are sufficient numbers of well trained doctors, nurses and allied health professionals to meet the growing demand for health services; and
  • – e-health, to take further steps towards the introduction of a personally controlled electronic health record for all Australians.
  • – Over time, the Government will build on existing investments in prevention, aged care, dental health and mental health.

Next steps 

The reforms require the cooperation of the State and territory governments.  The Commonwealth will formally put the reforms to the next COAG meeting likely to be held on 11 April. If the Commonwealth cannot get the states’ support, the Prime Minister flagged the possibility of a referendum on the proposals at the next federal election.

The Commonwealth’s National Health and Hospitals Network report can be accessed at$FILE/NHHN%20-%20Full%20report.pdf.